Risks of Investing in Mutual Funds

Any investment you make in a stock market like stocks, bonds and mutual funds will involve some level of risk. This means that the value may change at some point or you may even lose your capital (the amount you originally invested).

For example, you could invest $ 2,000 for 10 years and end up with $ 1100. Although getting a negative result like this over a 10 year period is extremely rare, but it is possible.

It is much more reasonable to expect a return of between 7 and 10 percent for equity investments, including equity mutual funds, for periods of 10 years or more.

However, there are short periods of time, for example as 1 year, where your stock fund may decrease in value by as much as 10, 20, 30 or 40 percent.

Likewise, you could have earnings of more than 50% in a year with your investment.

So if before investing with any brokerage company you should have a clear idea about your risk tolerance and also have reasonable expectations about the capital market. Will you sell your mutual funds if they lose 6% in 3 months? Those are simple things you should ask yourself.

Before you start investing, it is best to get advice from an investment services specialist.

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